Agile Companies

GLOBAL PROVINCE - Home - About This Site - Agile Companies - Annual Reports - Best of Class - Best of theTriangle - Big Ideas - Brain Stem - Business Diary - Dunk's Dictums - Global Wit & Worldly Wisdom - Gods, Heroes, & Legends - Infinite Bookstore - Investor Digest - Letters from the Global Province - Other Global Sites - Poetry & Business - Scenes from the Global Province -  A Stitch in Time - Two Rivers

Underwriter of Agile Companies--ALH Capital, Inc.

For a comprehensive list of the companies discussed on the Global Province, see our
Company Index.

Index of Agile Companies Entries:
1-25 · 26-50 · 51-75 · 76-100 · 101-125 · 126-150 · Current Entries

359. -new- Better Dealing with Exploding Bankruptcies
“Building a Better Post-Bankruptcy Board,” Wall Street Journal, May 12, 2008, p. B5 partially grapples with how to bring bankrupt companies back to health.  Generally it has become clear that neither creditors nor the other short-term powers in bankruptcy proceedings are likely to choose company builders as board members.  The problem is to get a mix of people to do the choosing who may look beyond narrow considerations. The major insight in this article is the observation that smart board committees pick candidates with more than one skill that has been adjudged vital for the rebuilding of the company.  We would suggest, further, that one is looking for people with skills that the bankrupt enterprise never had.  Business, in the 21st century, is a totally new creature, and one must have a sense that new board members can put some new sinews into the failed enterprise.  For instance, superior online abilities is a sine qua non of retail enterprises now:  they are not just a nice add-on, but have become the heart of the enterprise.

358. Strategies When There is No Solution
“Companies tend to ignore one complication along the way: They can’t develop models of the increasingly complex environment in which they operate.  As a result, contemporary strategic-planning processes don’t help enterprises cope with the big problems they face” (“Strategy as a Wicked Problem,” Harvard Business Review, May 2008, pp. 100-106).  This is an article that should be read with great care and then ignored.  Author John C. Camillus brings his readers face to face with a reality—that the world has grown inordinately complex and that the linear processes that corporate spear carriers use to describe a path through the rat maze lead into blind alleys.  But Camillus offers spongy answers to wending one’s way through the thousand but-ifs of modern existence.  In general corporations and other institutions have fallen far behind the curve:  they have not evolved at the same rate as the environment in which they seek to function.  Their best hope is to collaboratively involve outsiders from far and near in all aspects of planning, not just strategic exercises.  They must bring the outside in at a much more rapid rate.  At present there is a wall between them and the world as it is.  This is a very, very interesting article, but only if it helps corporate leaders realize how radically out of touch they are with the world as it is becoming.  (6/18/08)

357. The Checklist
We’re reminded that when it was a good airline, American had a checklist for just about everything.  As a friend said, “You know, the book told the stewardesses just how wide their smile had to be when they served drinks.”  And, you know, things turned out better there than at other carriers for just that reason.  A United Technologies engineer confirmed the same thing for us.  Once upon a time, American had the best maintenance of the domestic carriers, because it was so specific about how various processes would get done.  JAL (Japan Airlines) surpassed American but only because their workers would not take shortcuts at the end of the day.  They would follow every step meticulously no matter what.

All this came to mind when we read Atul Gawande’s “The Checklist” in The New Yorker, December 10, 2007.  Gawande, incidentally, is another Boston doctor who does exceptionally fine medical writing for the magazine.  The New Yorker’s best writing is in the medical area, perhaps stemming from the fact that a key editor is also a healthcare journalist.  Gawande is probably the best, in part because he is gripped by ethical passions which drive him, more than his comperes, to think about affordable, effective healthcare.  This disposition gives him a better sense of what it will take to solve our healthcare crisis than all the posturings of experts inside and outside the medical community.  In other words, he pays attention to simple basics that can make a difference.

In this case, he shows what a difference very simple checklists for complex medical processes can make in avoiding disease and discharging cured patients from the hospital.  “In 2001, though, a critical-care specialist at Johns Hopkins Hospital named Peter Pronovost decided to give it a try.  He didn’t attempt to make the checklist cover everything; he designed it to tackle just one problem, the one that nearly killed Anthony DeFilippo: line infections.  On a sheet of plain paper, he plotted out the steps to take in order to avoid infections when putting a line in.  Doctors are supposed to (1) wash their hands with soap, (2) clean the patient’s skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a sterile mask, hat, gown, and gloves, and (5) put a sterile dressing over the catheter site once the line is in. Check, check, check, check, check.  These steps are no-brainers; they have been known and taught for years.  So it seemed silly to make a checklist just for them.  Still, Pronovost asked the nurses in his I.C.U. to observe the doctors for a month as they put lines into patients, and record how often they completed each step.  In more than a third of patients, they skipped at least one.”  By authorizing nurses to check on the adherence to the correct processes, the hospital secured a wonderful outcome.  “Pronovost and his colleagues monitored what happened for a year afterward.  The results were so dramatic that they weren’t sure whether to believe them: the ten-day line-infection rate went from eleven per cent to zero”

“In December, 2006, the Keystone Initiative published its findings in a landmark article in The New England Journal of Medicine.  Within the first three months of the project, the infection rate in Michigan’s I.C.U.s decreased by sixty-six per cent.  The typical I.C.U.—including the ones at Sinai-Grace Hospital—cut its quarterly infection rate to zero.  Michigan’s infection rates fell so low that its average I.C.U. outperformed ninety per cent of I.C.U.s nationwide.  In the Keystone Initiative’s first eighteen months, the hospitals saved an estimated hundred and seventy-five million dollars in costs and more than fifteen hundred lives.  The successes have been sustained for almost four years—all because of a stupid little checklist.”

“I asked him how much it would cost for him to do for the whole country what he did for Michigan.  About two million dollars, he said, maybe three, mostly for the technical work of signing up hospitals to participate state by state and coördinating a database to track the results.  He’s already devised a plan to do it in all of Spain for less.”

“‘We could get I.C.U. checklists in use throughout the United States within two years, if the country wanted it,’ he said.”

356. Amazon Tech
"The Seattle Internet company, known for being one of the Web's biggest e-tailers, has recently been focused on delivering online services to small businesses through a unit known as its Web Services division.  The unit provides services such as storage and advanced computing capacity, making Amazon an increasingly popular tech destination for small companies that don’t want to pay upfront for their own computer infrastructure.”  See “Small Firms Tap Amazon’s Juice,”  Wall Street Journal, January 15, 2008, p. B3.  “Started in July 2002, Web Services is part of Amazon’s move to position itself as more of a technology company, even though its biggest business involves selling books, music and movies.  According to comments from Amazon Chief Executive Jeff Bezos, the company is aiming to cater to three types of customers: individual consumers, merchants and software developers.”  “Overall, Amazon Web Services now boasts 290,000 customers, up from 135,000 in late 2005.”  (4/16/08)

355. Guided Democracy
“CEO Vineet Nayar, 45, has written a case study about HCL’s experiment for the Harvard Business School….  He believes that in the future, democratic companies will outperform the command-and-control dictatorships that have persisted since the industrial revolution” (USA Today, December 17,  2007).  “Any of our employees can open a trouble ticket on anyone in this company, on (human resources), on payroll, on a manager, on anyone.  Those with trouble tickets have to respond.  It's like a customer opening a trouble ticket.  A response is required.  Otherwise, some departments can become gods in an organization, because they control the power.”  “In manufacturing, it's been command and control, because it is a single process.  In service companies, especially knowledge-based service companies, the value gets created in the interface between the employee and the customer.  When you travel on an airline, it is not the CEO who makes a difference.”  “Similarly, the workplace in India is very command and control.  I believe it’s easier to introduce workplace democracy in Europe and the USA.  As a society, the U.S. is more open to feedback.  It gravitates more easily toward its strengths.  But eventually, democracy works everywhere.”  Nayar’s understanding of the service imperative, and how that necessarily drives corporate democracy is a significant insight.  (4/2/08)

354. Upmarket Virtues
When times are bad, you want to serve the rich.  That was especially true during the Great Depression.  These days everybody in consumer goods is trying to migrate to the luxury market where spending has held up.  The latest example is Saks Fifth Avenue.  See “Saks's Wealthy Clients Help It Buck Trend,” Wall Street Journal, November 21, 2007, p. A10.  “‘Our customer feels good,’ Saks Chief Executive Stephen I. Sadove said yesterday, after the luxury retailer reported strong earnings for its fiscal third quarter.  Saks is on track to ring up ‘high single-digit’ sales growth in the fourth quarter at stores open at least a year and spending on Saks-branded credit cards appears healthy, he said.  His one caveat: weakness in Saks’s lower-level luxury goods, known as bridge products, could lead to a ‘modest decline in gross margin rate’ in the fourth quarter.”  The Saks organization, which shed its lower income department store units, is looking pretty smart.  The bloom, however, has come off the rose as even luxury sales slowed in the 4th quarter of 2007 and 1st quarter of 2008.  (2/27/08)

353. Small Companies: Big Bang
It has become an open secret that small, unheard of companies can achieve a loud and profitable voice through the web.  Small, independent, brick-and-mortar independent bookstores have become power retailers by selling their wares, particularly used books, on the Web, soon thereafter shutting down their locations on the street. One is more than 10 times the size it was when it was a small used bookshop in a southern college town.  In “Small Retailers Gain Large Presence on the Web,” New York Times, December 3, 2007, we learn “The number of small- and medium-size retailers selling online has swelled in the last two years, from 21 percent to 32 percent, according to a survey by IDC, a consulting firm.”  “The retailer of quirky home goods, RealmDekor.com, has experienced occasional sales increases not because of catalog shipments or television commercials, but because it formed relationships with bloggers and posted its products on new ‘social shopping sites’ like ThisNext.com and StyleHive.com.”  “Companies like Yahoo, Amazon and thousands of independent Web developers have become considerably better at building slick sites for merchants, sometimes within a few minutes, for less than $100.  Yahoo Store merchants, for instance, pay $40 to $300 a month, and a commission of 0.75 percent to 1 percent on each sale.  Merchants on the Amazon WebStore pay $60 monthly, along with a 7 percent commission.”  (2/13/08)

352. Grand Alliances
More than a decade ago, Peter Drucker said the compelling organizational trend of our era is alliances and partnerships, not the mergers, spinoffs, and other investment banking maneuvers that make the news.  Occasionally, however, the strategically important becomes more transparent.  Alliances have become inordinately important because no one company is powerful enough to dominate its market space globally and to keep up with all the technological strands that are changing its business.  EDS, under Michael Jordan, has grasped this point with a vengeance.  EDS was virtually the inventor of big-time outsourcing, and once upon a time it owned the field.  No longer.  IBM, for instance, dwarfs it.  What it has done is link itself to a whole nest of partners in order to become collectively more of a force with the world’s largest corporations.  See theWall Street Journal, July 24, 2007, pp. B1 and B3. 

351. Wine Alliances
We have said elsewhere that the dominant organizing tendency for business in the 21st century will be alliances. Businesses will thrive not by owning everybody on the block, but by freely collaborating with other businesses to grow and prosper. “Wine Made the Co-op Way,” New York Times, Oct. 6, 2007 lends credence to this new way of doing business. His family business sold to Constellation Brands for a tidy figure, Michael Mondavi is back in the wine business with a different concept. “To compete with the big guys, the small family-owned wineries need to be both independent and interdependent,” Mr. Mondavi said. “Own your own vineyard, maintain your personality and style, but be interdependent on everything else, like buying glass and negotiating with distributors.”

“Folio Fine Wine Partners, as Mr. Mondavi’s new venture is called, plans to stay below 50,000 cases from its own production here.” “That will be spread among five brands owned by members and friends of the Mondavi family: Hangtime, I’M, Medusa, Oberon and Spellbound.”

“To give greater heft to its business, Folio imports wine from Italy produced by the Frescobaldi family, as well as wines from Spain, Austria, New Zealand and Argentina. Altogether, Folio sold about 300,000 cases last year.

‘Our import portfolio is $40 million-plus in sales, so I can get the attention of the distributors to the point where I can at least present Oberon or I’M,’ Mr. Mondavi said. ‘I was convinced that if we just did our own 100 acres and 40,000 cases, we could never get enough clout in the market.’

Riding piggyback on Folio’s overall business are several much smaller winemakers.
‘The trend in the wine industry clearly is to tie up less capital,’ said Cyril Penn, Wine Business Monthly’s editor in chief. ‘There are quite a few of these kind of cooperative ventures sprouting up that are different spins on it.’

Another new model is Les Garagistes, a winemakers’ ‘village’ that plans to break ground next spring in American Canyon, a formerly neglected area between Napa and Vallejo.

350. The Power of Power Blogs
Not all blogs work.  Most of them don’t.  But some build a tremendous audience for struggling companies.  In this vein, see “Toy Stories: Show-and-Tell Blog Hooks Customers,” Wall Street Journal, September 10, 2007.  “Mr. Spangler largely credits his blog for his success.   Steve Spangler Science recorded more than $5 million in revenues last year” “liked what [the Netconcepts LLC founder Stephan Spencer] was saying about showing people you're the expert in that field by what you write.  I found out how important it was to have more content, like our experiment library.  People started visiting.”  Powerful headlines also pull in a lot of traffic.  “These days, the blog gets 15,000 to 20,000 unique visitors each day.  Early on, if I got 200 or 300, I was ecstatic.  I attribute 13% of overall sales online to the blog.”  This is a very, very busy website—with a 1,000 different ways of merchandising Spangler.  Part of its effectiveness obviously stems from the passion with which he flogs his wares; part of the power lies in the fact that science for kids is a very, very popular topic.  However, for families wishing to find an Internet curriculum that steeps their kids in science, PCS in Idaho is a leader, and its products are now bought in several lands that want to jumpstart their educational systems.  (12/12/07)

349. Intelligent Life
We have essayed at length on how luxury has totally disappeared from modern life.  You can read about this in “The Lost Art of Luxury.”  But London’s Economist would like to show that the lux life is still around, restaging a magazine called Intelligent Life to reach hefty pocketbooks and upscale advertisers.  See “The Economist’s Foray into Luxury,” Wall Street Journal, September 3, 2007.  “This week, London-based Economist Group Ltd. put out the first issue of a quarterly general-interest magazine called Intelligent Life.”  “The magazine appeared once in 2005 and once last year.  It has been spruced up to try to cash in on the growth of luxury-goods advertising.”  “The new version is laid out more like a fashion magazine.  The pages are about 20% larger than before, there are more photographs and more white space.  Previous editions featured articles on how to travel into space and white-collar boxing.  The current edition has 11 pages of photographs of a French boar hunt and an article examining the problems raised by inheriting lots of money.”  “‘We are lifestyle with substance,’ editor Edward Carr wrote in an editorial in the current edition.”  “Monocle and Intelligent Life have entered a crowded market.  Well-established magazines such as Time Warner Inc.’s Wallpaper*, Condé Nast’s GQ and Vanity Fair are among those that dominate the market for luxury-goods advertising in the U.K.”  (12/5/07)

348. SCE/Ambient Orb
Here's an even wilder idea: How about making our energy use visible to everyone?  Imagine if your daily consumption were part of your Facebook page—and broadcast to your friends by RSS feed.  That would trigger what Ambient Devices CEO David Rose calls the sentinel effect: You'd work harder to conserve so you don't look like a jackass in front of your peers.

347. Redefining Colleges and Universities
One of America’s most famous physicists told us 50 years ago that it’s a simple matter what you do about college.  If you are going to be in the sciences, go to a large university, because only there will you find the physical plant to support your investigations.   Otherwise, go to a small liberal arts university where you will get an infinitely better education than you will receive at one of the big monstrosities.  True enough.  But time and circumstance has complicated matters.  In a global age with all its digital connections, the function of a university and of a college has changed the world over.  So you have to examine each school on a case-by-case basis to see if it has adjusted to the future or if it is still riding a dead horse.  So this note is only part of an ongoing discussion we will have about the future of higher education.

346. Small Banks Still Can Make It
“A small bank is the vein that carries blood to the heart,” said Edward Carpenter, chairman of Carpenter & Company, an investment bank that in 33 years has organized the founding of 708 banks in California and across the United States” (New York Times, March 15, 2007, p. C5).  Community banks continue to be founded, since they are still better at serving small businesses that have been on the increase.  There is demand for new banks since mergers and the like roughly halved the number of banks nationally in the last quarter of the 20th century. (10/31/07)

345. Haier Calling
“Twenty years ago, the Qingdao Refrigerator Factory was a dump, its workers were unpaid, and its products were shoddy.  Today it’s called Haier.  The home-appliance giant is China’s best-known global company….”  See “Raising Haier,”  Harvard Business Review, February 2007, pp. 141-146.  In this article Zhang Ruimin tells how he put it all together.  “When you start a business, your employees are willing to follow you, if you set a good example and bear more hardships than they do.”  “Later, it’s conviction that appeals to people.”  At the start Ruimin did a few fundamental things—getting loans so employees could get paid, buying a bus  so that it was not so hard for them to get to the factory.  Then he instilled discipline built around clear rules.  From the article it would appear that, on the one hand, he is autocratic, expecting fast, decisive action on his demands, but that he fosters quite a bit of tactical innovation on the part of his project teams, as long as it all adds up to the results he wants from them.  A signal event was his decision to build Haier Industrial Park in 1991—for which he was short of funds, but he brazened it through.   As it turns out, the country was headed towards heated expansion, and the building of this vastly expanded capacity had a great deal to do with turning Haier into a very larger company.This interesting essay does not reveal as well the kinds of tactics that have allowed Haier to go global, which one would have to glean from other articles.  For instance, in the U.S., it has made quite a mark in very small refrigerators a segment not well served by GE and the other main producers.  This end run is similar to how Japanese power tool manufacturers gained a foothold in America: they went to a high end segment that Black and Decker, etc. served poorly. (10/24/07)

344 Bringing Back Marks and Sparks
Marks and Spencer, the department store everybody went to in Great Britain, grew fat and troubled as it entered the 21st century, having achieved a profit of 1 billion pounds in 1998.  Oh, how the mighty can fall!  It had gotten into too many things and too many places and, by 2004, was carrying unconscionable inventory.  Stuart Rose, who had come out of Marks, and then went on to head other retail companies, came back to ward off an unfriendly takeover, slash out excess lines and inventory, wring out 260 million pounds of costs, and refit rather tired stores.  Thereafter, sensible controls, an energetic team, and a clear merchandising policy has brought the company in sight of its former profit levels.  Rose gives a good account of this in “Back in Fashion: How We’re Reviving a British Icon,” Harvard Business Review, May 2007, pp. 51-58.  These first person accounts are amongst the best articles now appearing in HBR, which tends to have too much copy from professors and consultants, people who have now largely fallen behind the business curve.  Thoughtful articles from turnaround presidents and bootstrap entrepreneurs are relevant in the very uncharted territory of the 21st century.  Alumni with operations experience on the outside, such as Rose, make good CEOs in a pinch.  Sort of like bringing in Winston Churchill for the Battle of Britain.  There are a few surprises with Rose, such as the hiring of Mary Gober, to do “Billy-Graham-type training” starting in July 2005, with the entire store workforce of 56,000 attending motivational sessions over a nine month period.  This reminds us of a clever fellow, a one-time Ford dealer in Cuba, who did the same thing at Litton Industries: he brought in a financial theory consultant from the East, not so much for the theory, but to get people “to lift up their eyes.”  When you’re turning around a company, you have to make sure people are not staring down at the ground.  Marks, incidentally, has a lousy website, so it still has a ways to go. (10/24/07)

343. Grand Alliances
More than a decade ago, Peter Drucker said the compelling organizational trend of our era is alliances and partnerships, not the mergers, spinoffs, and other investment banking maneuvers that make the news.  Occasionally, however, the strategically important becomes more transparent.  Alliances have become inordinately important because no one company is powerful enough to dominate its market space globally and to keep up with all the technological strands that are changing its business.  EDS, under Michael Jordan, has grasped this point with a vengeance.  EDS was virtually the inventor of bigtime outsourcing, and once it owned the field.  No longer.  IBM, for instance, dwarfs it.  What it has done is link itself to a whole nest of partners in order to become collectively more of a force with the world’s largest corporations.  See the Wall Street Journal, July 24, 2007, pp. B1 and B3.  As well, EDS has had to compete with cheap offshore providers, particularly in India.  “But what makes this alliance unusual is that the partners actually work together under one roof, and operate as one team pitching a client on a contract and carrying out the work.”  “When EDS unveiled the consortium in October 2004, it had six partners: Sun, Microsoft, Dell, EMC, Xerox Corp. and Cisco Systems Inc. Oracle and SAP AG joined later.  Today about 250 engineers from partner companies are dedicated to EDS, which houses them in offices at its main Plano campus and at a facility in Auburn Hills, Mich.”  “In 2006, deals involving the alliance counted for 40% of EDS’s $26.5 billion in contract signings.”  In 2007, as of June, they add up to about 50%.  (10/17/07)

342. Phillips Reborn
Lumbering Phillips of the Netherlands looks like it is making a smart strategic shift.  It is exiting several markets, such as segments of consumer electronics and computer chips, where it was getting whipped, and tackling at least one growth area where it might make a mark.  In specific it is getting into healthcare with services for the aging.  See “Fleeing Chips and TVs, Philips Makes Big Bet On Aging Consumers,” Wall Street Journal, July 11, 2007, p. A1.  “Philips paid $750 million last year to buy Massachusetts-based Lifeline, an acquisition that represented a turning point for the company.”  The service permits the elderly, for $40 a month, to call easily into a call center that can respond to anxious health questions and the like.  “Philips is joining a parade of industrial giants making big bets on a growing elderly population and rising incidence of chronic diseases. General Electric Co. and Siemens AG, which both manufacture large-scale medical equipment, are restructuring to make big pushes into health care.”  “Philips projects its nascent consumer-health division—which so far also sells baby-care equipment, such as home infant monitors—will bring in sales of €750 million to €1 billion, or $1.03 billion to $1.37 billion, by the end of next year”  This builds on the strong position Phillips occupies in medical equipment, an area of robust growth for it.  (10/17/07)

341. Linear Technology Corporation
Linear Technology can charge a lot for its analog chips and does.  “Linear makes a 39% profit on its $1.1 billion in sales in calendar 2006—more than five times the average for U.S. industrial companies,” and way ahead of Microsoft and Google, which hover in the mid-twenties.  Others are beginning to horn into the analog space, and both Richtek of Taiwan and Freescale of Austin, Texas are targeting the power management area where Linear has focused.  But Linear has 17,000 customers, none accounting for more than 3% of its sales, so it is not easy to pluck away its business.  Linear also is religious about keeping its costs down, buying used testing equipment and doing lots of other pennypinching.  See the Wall Street Journal, July 10, 2007, pp.A1 and A10.

340. Red Wine Medicine
Several of us our drinking red wine, cheered by the thought that it may bolster our health. Sirtris, a Cambridge biotech spun out of some research at Harvard, is busy proving our theory well-founded.  “Imagine a pill, derived from a compound found in something as benign as red wine, that treated the most feared and debilitating diseases of aging: illnesses like diabetes, neurodegenerative conditions like Alzheimer’s and Parkinson’s, and many forms of cancer.  Imagine, furthermore, that this pill had no injurious side effects.  Imagine, finally, that the pill’s only side effect conferred what human beings have always wanted: an increase in life span.  That’s what Sirtris wants to create.”

“Sirtris was founded in the spring of 2004 by Dr. Westphal to commercialize the research of David Sinclair, a professor of pathology at Harvard Medical School and the director of the Glenn Laboratories for the Biological Mechanisms of Aging.  Mr. Sinclair, who at the relatively youthful age of 37 is already renowned for his investigations into how we grow old, discovered in 2003 that a molecular compound called resveratrol, found in red wine and other plant products, extends the life span of mice by as much as 24 percent and the life span of other animals, such as flies and fish, by as much as 59 percent.”

“Mr. Sinclair believes that resveratrol works by activating a gene called SIRT-1, which many biologists think plays a fundamental, if still obscure, role in regulating life span in mammals.  Scientists have shown that increasing the activity of SIRT-1 in animals slows down aging and postpones or eliminates diseases of old age.”

339. Phillips Reborn 
Lumbering Phillips of the Netherlands looks like it is making a smart strategic shift.  It is exiting several markets, such as segments of consumer electronics and computer chips, where it was getting whipped, and tackling at least one growth area where it might make a mark.  Specifically, it is getting into healthcare, with services for the aging.  See “Fleeing Chips and TVs, Philips Makes Big Bet On Aging Consumers,” Wall Street Journal, July 11, 2007, p. A1.  “Philips paid $750 million last year to buy Massachusetts-based Lifeline, an acquisition that represented a turning point for the company.”  The service permits the elderly, for $40 a month, to call easily into a call center that can respond to anxious health questions and the like.  “Philips is joining a parade of industrial giants making big bets on a growing elderly population and rising incidence of chronic diseases. General Electric Co. and Siemens AG, which both manufacture large-scale medical equipment, are restructuring to make big pushes into health care.”  “Philips projects its nascent consumer-health division—which so far also sells baby-care equipment, such as home infant monitors—will bring in sales of €750 million to €1 billion, or $1.03 billion to $1.37 billion, by the end of next year.”  This builds on the strong position Phillips occupies in medical equipment, an area of robust growth for it.  (10/3/07)

338. Red Wine Medicine 
Several of us our drinking red wine, cheered by the thought that it may bolster our health. Sirtris, a Cambridge biotech spun out of some research at Harvard, is busy proving our theory well-founded.  “Imagine a pill, derived from a compound found in something as benign as red wine, that treated the most feared and debilitating diseases of aging: illnesses like diabetes, neurodegenerative conditions like Alzheimer’s and Parkinson’s, and many forms of cancer.  Imagine, furthermore, that this pill had no injurious side effects.  Imagine, finally, that the pill’s only side effect conferred what human beings have always wanted: an increase in life span.  That’s what Sirtris wants to create.”

“Sirtris was founded in the spring of 2004 by Dr. Westphal to commercialize the research of David Sinclair, a professor of pathology at Harvard Medical School and the director of the Glenn Laboratories for the Biological Mechanisms of Aging.  Mr. Sinclair, who at the relatively youthful age of 37 is already renowned for his investigations into how we grow old, discovered in 2003 that a molecular compound called resveratrol, found in red wine and other plant products, extends the life span of mice by as much as 24 percent and the life span of other animals, such as flies and fish, by as much as 59 percent.”

“Mr. Sinclair believes that resveratrol works by activating a gene called SIRT-1, which many biologists think plays a fundamental, if still obscure, role in regulating life span in mammals.  Scientists have shown that increasing the activity of SIRT-1 in animals slows down aging and postpones or eliminates diseases of old age.”

337. Service Research and Innovation Initiative  
IBM, Oracle, and other large technology companies such as Accenture, Cisco, Computer Sciences, EMC, Hewlett-Packard, Microsoft, and Xerox are looking for ways to plug more technology into the service sector (New York Times, March 18, 2007, p. C5).   Many universities are adding service science courses and the National Science Foundation is now financing a few service research projects.  However, even with a symposium coming up in May, the organization looks a bit sleepy.  (9/12/07)

336. Farm Tourism 
We have commented on some of the farm tourist initiatives in North Carolina in “Amazing.”  But farmers and others around the nation are doing all sorts of things to bring paying customers out to the farm.  As their revenues tail off from standard crops, dairy and beef cows, etc., the farmers are inventing a host of tricks to find some revenues.  Farm tourism is one. Specialty or boutique farming is another with organic initiatives, hormone free milk, and heritage breeds.  As well, there are new museums and sundry other exhibitions to draw urbanites out into farmland—all promoted by the the Association for Living History, Farm and Agricultural Museums.  Some of this is summed up in “10 Great Places to Dig Up Old Dirt on Farming,” USA Today, March 23, 2007, p. 3D.  (9/5/07)

335. The Milkman Cometh 
“Returning to your doorstep: the milkman” (Wall Street Journal, May 15, 2007, p. B4).  “Crescent Edge Dairy Inc. in Sharon, Mass., a small third-generation family dairy … still processes and delivers its own brand of hormone-free milk in old-fashioned glass bottles, placing them in white steel boxes outside customers’ homes.”   “The milkman was still a familiar sight as recently as the 1960s when home delivery accounted for 30% of all milk sales….”  “In addition to milk, Hudson Milk also delivers items like cream, organic eggs, yogurt and Poland Spring water for a flat delivery fee of $2—which has boosted his average order to $25.”  Online orders at Crescent have been the key to higher sales per customer, with Internet orders 20% higher than other purchases.  Crescent is also trying to build its ice cream business where margins are higher and volume is now up to $1 million a year.  (9/5/07)

334. The Mystery of Belk’s
Belk, headquartered in Charlotte, North Carolina, is the large privately held private department store in the United States.  We do not understand it very well, especially as we prowl through its aisles.  We do not recommend that you go there, but it is a survivor.  Obviously it was a whole lot more fun in 1888 when it was founded.  First called “New York Racket,” a fantastic name, it then became Belk Brothers.  Apparently its profits and sales keep growing, as “Belk Defies Odds” (Raleigh News and Observer, March 24, 2007, pp. D1 and D5).

333. Water Works
Personalized Bottle Water absolutely proves the power of packaging.  Mark Sikes was a stick-on label merchant until he got the idea of setting up a bottler in Little Rock, where he would stick on the buyer’s label.  Schools, funeral homes, and hotels soon jumped on the bandwagon.  By 2006 he got the revenues up to $350,000.  He has since gotten advice on how to sell over the web, how to franchise, and how to get more strategic.  Apparently he can haul in $52.00 a case when he is selling to wedding planners, and he’s been told to close in on this market slice.  (7/18/06)

332. New York City’s Useful Broker 
The very bright commentator on New York politics, Ken Auletta, calls Howard Rubenstein “The Fixer” in the New Yorker, Feburary 12, 2007, pp. 46-57.  Our scattered contacts with Rubenstein would find this to be a bit glib: he is a quiet good counselor and doer of sensible things, knowing how to operate under the radar screen.  He is better called a catalyst that makes useful things happen between people who don’t know each other or whose egos keep them from successfully talking to one another.  Even ‘consiglieri’ would have been more apt.  He clients run the gamut—Steinbrenner Murdoch, etc.—but his most important base of contacts we think has been a slew of the moguls in the real estate industry.  These relationships have led to everybody else, particularly the politicians up and down the state.  Strange, we think, that Wal-Mart does not seem to be a client: it has stumbled in New York City.  (7/18/06)

331. IBM in India 
“Last June IBM held its annual investors’ day on the grounds of the Bangalore Palace, a fake Windsor Castle in India’s equivalent of Silicon Valley” (“Hungry tiger, Dancing Elephant,” Economist, April 7, 2007, pp. 67-69).  “With 53,000 employees, India is now at the core of IBM’s strategy,” its employee workforce there second only to America, and revenue growing 40 to 50% a year.  CEO Palmisano has announced that IBM will invest $6 billion in India over the next 3 years.  Incidentally, John Patterson, IBM’s chief procurement officer, has moved to Shenzen, as IBM puts functions in the countries that can best serve it globally.  The Company meanwhile has been growing services and software to kickstart its revenues and has hopes of  both increased growth and profitability by achieving synergies between hardware (IBM’s traditional business but a shrinking percentage of the pie) and the other two.  In 2006 Hewlett Packard’s revenues pulled just past  IBM ($91.7 billion vs. $91.4 billion).  (7/11/07)

330. Post-Industrial Smarts  
For developed countries, we have theorized, the only hope in a global economy where somebody in Asia can crank out any product at half the cost is “vive la difference.”  Make one of a kinds that don’t make for easy knock-offs.  The product must not only be physically differentiated: the whole experience associated with it must be a cut above things that come out of the mass market economy.   

All this involves a different culture and a different set of skills quite apart from the attitudes and habits learned in the modern nation state.  Hither and thither, there are solitary examples.  “The Fondation de Coubertin spreads over an estate covering 160 acres in Saint-Rémy-lès-Chevreuse, 20 miles southwest of Paris.  Virtually hidden in the estate's secluded woods behind the sculpture-studded gardens and 300-year-old chateau are massive workshops and an art foundry.  Here, 150-odd of Europe's finest artisans, including 30 young fellows on full scholarship, are working in metal, stone and wood, or casting sculpture in bronze and steel for world-class artists living and dead, including the Spanish architect and sculptor Santiago Calatrava, the Hungarian sculptor Marta Pan, and the late Auguste Rodin” (Wall Street Journal, March 21, 2007, p. D11).   

“Besides its setting on the grounds of a magnificent estate, what distinguishes the foundation from just a bunch of workshops is the fellowship program for 30 young artisans, mostly French but including other Europeans and the occasional American.  They have previously apprenticed in one or another of these crafts and most of them are likely to be admitted soon to the Compagnon du Devoir, the guild that emerged in the 11th century when the great cathedrals of Europe were under construction.”  “During their year at Coubertin, they work on the foundation's commissions and their own chef d’oeuvre, a sort-of doctoral dissertation that they must submit for admission to the guild.  But they also get courses in English, psychology, computer-assisted design, math, accounting and salesmanship, as well as regular lectures from visiting scholars and artists covering a range of subjects, from Guy de Maupassant to the life of bees.  Nowhere else in the world can such craftsmen find a similar experience.”  

329. Automatic Search Engines
As we suggested in “In Search of Searchlights,” search engines on the web are still pretty crude, missing much of what is there and spitting out hundreds of entries that are not relevant to what the searcher is trying to discover.  Efforts aplenty continue to try to devise a better mousetrap.  One “Metaweb Technologies, is led by Danny Hillis, whose background includes a stint at Walt Disney Imagineering and who has long championed the idea of intelligent machines.”  It seeks to “create a vast public database intended to be read by computers rather than people, paving the way for a more automated Internet in which machines will routinely share information” (New York Times, March 9, 2007).  “On the Web, there are few rules governing how information should be organized.  But in the Metaweb database, to be named Freebase, information will be structured to make it possible for software programs to discern relationships and even meaning.”  “It’s like a system for building the synapses for the global brain,” said Tim O’Reilly, chief executive of O’Reilly Media, a technology publishing firm based in Sebastopol, Calif.  Hillis was a founder of Thinking Machines, a pioneering firm in the field of massively parallel computers.  He’s also been involved with Applied Mind.  P.S: The name Freebase is very unfortunate since it also refers to the world of illicit drugs.  (6/13/07)

328. Free Association
The great value maker for forward-looking companies in our age is not merger and acquisitions, but strategic alliances.  Huge volatility in markets across the world coupled with rapid technology shocks that change the business playing field daily have devalued traditional organizations—and the outdated acquisitions they make.  William Dunk Partners, Inc. expands on this trend in “Free Association.”  (5/2/07)

327. All Volunteer Army of Workers
“Will Volunteers Replace Paid Employees As Companies Bank on Free Contributions?” (WSJ, Feb 17-18, 2007, p. A5 cited from Time).  Everything, from Wikipedia to Linux innovation, depends on unpaid volunteers to create their product.  “One of the leading prophets of the gift economy is Youchai Benkler, a Yale University law professor whose 2006 book The Wealth of Networks can be read for free online (www.benkler.org).”  Many doubt that volunteerism for profit-making enterprise will work.

Time and WSJ barely scratch the surface in coming to terms with the innovative ways companies are putting volunteers to work.  It’s not just that the labor is free, but the volunteers often are doing jobs that cannot be performed by hired hands.  Viral marketing firms often depends on a corps of advocates to spread the word about a product, an idea we touched on in “Authentic Conversations.”  Banks get you to do all the works at their automatic teller machines; a host of organizations want you to manage your purchase transactions, in all respects, on the Internet.  Healthcare organizations of various sorts are no longer treating their patients as dumb terminals, but are helping them make informed decisions about their own health.  Many companies provide their ‘volunteers’ with minor gifts or inducements, but many free workers enjoy the tasks and would work without compensation.

326. -new- Dockers Saves Levi Strauss
“When the beleaguered jeans company reported fiscal 2006 earnings … the U.S. Dockers unit was a standout, posting an annual sales increase for the first time since 1998.”  Three years ago, Levi had tried to sell the division.   John Goodman, formerly of Gap, and K Mart, who turned around Banana Republic, was brought in to head things up.  Goodman turned a khaki company into a brand, adding on shirts, sweaters, blazers, and more fashionable women’s clothing.  It also started bringing out men’a apparel in four categories—work, weekend wear, formal wear, and golf.  “Dockers launched its most expensive pants to date, $150 dress pants made with super-fine wool that is machine-washable.”  Khaki, of course, is hot, and higher end brands may threaten Dockers resurgence, just as premium jeans ate into Levi’s market.  Interestingly, offbeat operations are the salvation of several clothing companies.  For instance, Hilfiger’s operations in Europe, once troubled, are now a key profit center of the company.  (4/25/07)

325. Hilfiger Makeover in Europe
Tommy Hilfiger, a fashion brand in the United States that has always been at the low end of the high end, has had to have a facelift in Europe.  Hilfiger, like other clothiers, has discovered that U.S. market growth has peaked out and that it has to go abroad.  But it has discovered that Europe has different merchandising rules, as recounted in the Wall Street Journal, February 2, 2007, pp. A1 & A17.  “The upscale loft-like space (in Dusseldorf), one of 34 Hilfiger Denim stores in Europe, is a new concept catering specifically to European tastes.”  Higher quality shirts and jeans bear price tags many times higher than those in the States.  “The U.S. clothing market has grown less than 5% annually in recent years.”  Department stores now allot 1/3 of their space to private brands or lines with which they have an exclusive.  Hilfiger in the United States is in turnaround mode, having peaked at $1.9 billion in 1000, and it now relies on its European success to stabilize the company.  “Margins in Europe can be 50% to 100% higher than in U.S. department stores….”  Dutch born Fred Gehring, now CEO of Hilfiger, built Hilfiger Europe steadily from its base in Amsterdam.  Besides signing up the big department stores, he also did business with the boutiques, 4500 of them in 15 countries.  He set up many showrooms with 25 lines of merchandise for retailers to view, creating high operating expenses, which were vital, nonetheless, in his push to overtake European brands.  He now has a separate European design staff in Amsterdam of 37 people.  They design for an older demographic in Europe, not the youth crowd Hilfiger aims at in the U.S.  (4/11/07)

324. Cisco: DIY Innovation
Having done a raft of acquisitions, Cisco is now trying to grow new products and services at home.  See “Cisco’s Homegrown Experiment,” Wall Street Journal, January 23, 2007, p. A14.  “The Telepresence high-end video-conferencing system is a test of Cisco’s new plan to juice growth: Create new products, especially those outside its core networking gear, from scratch, on its own.”  “The company’s high double-digit growth rate has slowed to low double and single digits. To recapture some of its former glory, Cisco is trying to jump-start new growth by making completely new products outside of networking gear on its own.”  “The unit was launched by Charlie Giancarlo, Cisco’s chief development officer, who is often mentioned as an heir apparent to Mr. Chambers.  Mr. Giancarlo says he wanted to set up a structure to house new nonnetworking products that were bubbling up within the company.”  (4/4/07)

323. Keeping the Tarnish off Tiffany
“In the late 1990s, Tiffany & Co’s silver charm bracelet was a must-have fashion accessory.  Teens jammed Tiffany’s hushed stores clamoring for the $110 silver bauble. Sales skyrocketed, investors cheered.”  But Tiffany worried, afraid that the teen crush would ruin its standing with older, very affluent customers.  It raised the price of the bracelet, hoping to shed its raucous following.  See “To Refurbish Its Image, Tiffany Risks Profits,” Wall Street Journal, January 10, 2007, pp. A1 and A15.  And it introduced more upscale luxury merchandise.  The move has been a mixed success: it is selling more upper-end merchandise, but it has not recovered the revenues and profits of yesterday.  The truth, moreover, though not known to many, is that Tiffany for decades has depended on middlebrow customers buying midprice merchandise, and it really cannot afford to lose the great middle.  The company continues to aggressively expand into smaller cities, and we wonder if that will cheapen the brand.  The bracelet eventually worked its way up over $200, although we believe we saw one at $169 on a recent visit.  Though the stock is up, we sense that the company is still in an uncertain period.  (3/14/07)

322. Over Hill and Dell
You have heard that Dell is faltering, losing market share to H-P, and plummeting in other ways.  Don’t bet on its decline.  Michael Dell has demonstrated founder smarts for a long time, and we can imagine he will stage a comeback.  He is demonstrating his usual go-it-alone smarts in his environmental approach.  He is going to sell trees online to put green in the world.  See Financial Times, January 10, 2007, p. 17.  Dell said “Dell was the most energy-efficient company in the industry and the global leader in product recycling.”  “Dell’s carbon-neutral initiative is a partnership with the Conservation Fund and Carbonfund.org non-profit organizations, who will plant the trees in sustainably managed forests.”  He is asking consumers to donate $2 for every notebook computer they buy and $6 for every desktop.  Dell will pick up the administrative costs of the Plant a Tree Program.  Recently, Dell has come back to run the company, which is not doing as well as it might in consumer markets.  (3/7/07)

Update: Dell Changes His Bench.  Michael Dell once before brought in a team to put some pep into his company, capturing, for instance, nimble Morton Topfer who came out of Motorola.  Now he’s made Don Carty, one-time ceo at American Airlines, his chief financial officer.  He has brought in others from IBM, Motorola, etc, and has a raft of headhunters working on his top team. 

321. Playland
Playland, in Rye, New York, is the nation’s only publicly owned amusement park.  It was formed to provide a wholesome recreation spot for Westchester residents who were concerned about the unsavory elements that had been attracted to Rye beaches.  Westchester County is struggling to keep it afloat and has been doing a facelift to see if it can be re-floated.  See “Finding Funds to Keep the Play in Playland,” New York Times, December 17, 2006, p. NJ7.  It attracts a million visitors a year, has been part of several Hollywood films, and once provided the practice rink for the New York Rangers.  It’s also a National Historic Landmark.  The county is refurbishing the bath houses, buying up privately owned rides, redesigning the Kiddyland area, and taking steps to increase customer flow.  To savor its delights, take a look at “A Fun Afternoon at Rye Playland.”  In business since 1928, Playland has a lively website with carousel music to peddle its wares.  (3/7/07)

320. The Easy Button
About two years ago, Staples, one of the big three office-supply chains along with Office Max and Office Depot, started putting out TV commercials showing people accomplishing tough, boring tasks with an ‘easy’ button.  The idea was to convey that Staples is an easy, relaxed, fast shopping experience.  The ads caught on so much that now Staples now offers Easy Buttons on its shelves for $4.99.  See “Ad Play,” New York Times Sunday Magazine, December 17, 2006, p. 40. 

What’s so interesting about this campaign for us is that nothing could be farther from the truth.  We’ve shopped at Staples, every month or so, and it’s a horror show as far as we can tell.  Stuff is wretchedly hard to find and check out takes forever.  Heaven help you if you want to use one of its services, say copying.  One of the things that’s happened to advertising is that it tries to take up a company’s worst flaw and claim that the flaw does not exist: shopping is tres difficile at Staples, so the trick is to call it easy.  Years ago, a senior IBM official, who had turned down the offer of a PC in his office to everybody’s distress, told us that there was nothing friendly about ‘user-friendly’ computers.  In fact, computers are a mass of confusion that regularly go into meltdown.  And the list continues. 

319. Disarray in U.S. Financial Markets
You will in “It’s Not Carly’s Fault” and in several other places on the Global Province commentary about the utter, complete, and devastating failure of Sarbanes-Oxley, the handiwork of two legislators on the way out.  It, along with missteps by the Bush Administration, have sent our financial marketplace into retreat—our commercial Iraq.  Clipped comments in the Financial Times, November 17, 2006, p. 14 sum it up nicely.  “The compliance revolution has eaten its own.”  The SEC’s Annual Report is self-congratulatory on all it has done to clean up the markets.  “It is now clear that Europe see financial market regulation as a source of competitive advantage.”  The UK has proposed a law “allowing the Financial Service Authority to ring-fence the London Stock Exchange … against ‘disproportionate regulation’—code for American laws in general and the Sarbanes-Oxley Act in particular.” Other European initiatives are afoot to counter U.S. over-regulation.  Any of us who advise public companies know that Sarbanes has become a license to steal for both accountants and lawyers who have laid on wonderful fees to help companies through all the trash imposed by Sarbanes and the SEC.  Smart companies are migrating overseas for listings and to raise their money, raising the power of London as a financial center and taking air out of New York’s balloon.  (1/17/07)

Update: At Home in London
A number of journalists have written us saying that Sarbanes-Oxley ain’t that bad.  The protests against it, they think, are just the usual huffings and puffings of Wall Street types and knee-jerk chief executives who always want less regulation.  When it’s all said and done, they say the new regs are not that onerous.  The facile one-page financial journalist for the New Yorker, James Surowiecki, doesn’t think we are missing out on very many IPOs and that anyone of note still also looks to the U.S. for capital. 

We’re all for tight, sensible regulation, but let us assure  these scribblers that they are simply dead wrong.  Our work has made us intimately aware of the egregious extra costs accountants and lawyers now impose on companies because of SOX.  We converse with some regularity with companies avoiding listings in the U.S.—most recently a fine German company.  We know of worthwhile executives who no longer want to serve as company directors, and of companies who are contemplating going private.  All because of SOX and the regulatory atmosphere it has engendered. 

318. Internet Realtors
Internet realtors threaten to displace traditional, expensive, slow, brick-and-mortar realtors in the years ahead.  The Financial Times, November 25-26, House and Home, p.1 takes a look at this revolution in “A Bitter Battle for Sales Territory: With growing numbers of us turning to the internet to buy and sell our homes, are the days of the traditional estate agency numbered?”  It’s not hard to see why Glenn Kelman of Redfin.com “backed by Microsoft pioneer Paul Allen, is seen as a threat” to the agent down the street.  “‘We think people can save thousands of pounds,’ says Helen Probert, the 28-year-old founder of Cutthemiddleman.co.uk, one of about 100 UK-based self-sell websites.”  New kinds of sites aggregate ads selling homes provide satellite imagery of towns and houses, give additional details on properties.  Redfin flat fees come in at about $2,000 versus the egregious 6% in the United States, and 2% in the UK.  (1/10/07)

317. Social Entrepreneurs
Ashoka, founded and run by an ex-McKinsey type, is one of many organizations set up to lend aid and comfort to social entrepreneurs.  In theory, anyway, social entrepreneurs take on the deep problems of society but put freebootin’ ideas and techniques and charisma to work to cut down big nagging roadblocks to poor people’s progress.  See, particularly, “The Rise of the Social Entrepreneur.”  While it is clear that intermediaries can bring more capital into social causes, the jury is still out whether they help or hinder the entrepreneur-led causes they are underwriting.  “Meanwhile, Ashoka hopes that its relationship with UBS will flourish, and that prizes will soon be awarded across Latin America and Asia.  But as well as highlighting the growing role of social entrepreneurs, this experiment also points to another new trend: a more active role for intermediaries in the emerging philanthropic capital market.” 

316. Bad Apple
Apple Computer has long been the darling of mildly anti-system affluents.  But their affection is probably not warranted.  Bad old Microsoft is probably doing more for the world (Gates Foundation is very active in global health) than the inventive but perhaps more provincial Apple chieftains.  Jobs, for instance, is psychopathically tight-lipped and covert, an odd posture for the pres of a company that is suppose to be mellow, pretty, laid back, and, above all, open.  He does not hand out written instructions with his computers, and the online helps are no help at all.  Neither the screens nor the operating paths are intuitive.  The I-Pod, like the computers, is horribly overpriced, subject to breakage, hard to use, and difficult to keep charged.  Users say the graphics are wonderful, but so what.  It is little wonder to us that Holman Jenkins wound up calling Jobs “A Typical Backdating Miscreant,” Wall Street Journal, October 11, 2006.  Of course, Holman, an apologist for breaking the law, does sort of pan all the furor over backdating options, clearly not thinking the practice is a big deal.  Kindly Steve Jobs has gone after a host of bloggers who dare to tell secrets that they have learned about life inside Apple with endless law suits. See BBC News.  (12/13/06)

315. Emap
“Ten years ago, says Emap Group Chief Executive Tom Moloney, no prestige media company wanted to touch either data directories or trade shows, both of which were considered the ‘rough end of the business.’  But since then the four big publishers—Thomson, Wolters Kluwer, VNU and Reed Elsevier—have transformed their businesses from traditional media such as trade papers into commercial data vending, mostly with electronic distribution.”  (See “The Rough End of the Business,” Forbes, June 19, 2006, pp.134-35.)  “Emap is the largest trade show organizer in Britain.”  It has bought seven trade shows and started up another three.  Its share of UK magazine sales at newsstands is 19%, with Time Warner coming in at 21%.  “Emap’s heavy metal music magazine, Kerrang!, is now a radio station, TV channel, Web site and host of ‘live’ music events.”  As such its Emap ad salesmen have perfected cross selling and the idea of selling total platforms for brand building.  Its foray into America—the purchase of Peterson Magazines—nearly broke the company, but it dumped Peterson in 2001 in a sale to Primedia.  In addition to trade shows, it has been a big buyer of electronic data banks and radio properties.  The data and trade show niches are felt by Emap to be safe revenue streams, while advertising spending in traditional channels is flat and is being split up amongst more and more magazines.  (12/6/06)

314. The Green Theme
The pols and the journalists are slowly twigging on to the fact that business is turning green.  They point to the battalion of Fortune 500 companies that have jointed Pew’s initiatives on global warming.  Or they spy Wal-Mart’s goals for greening itself and its push to stock more organic products. 

But it’s all the little things and unheard of companies that truly convince one that we have turned the corner.  Bazzini Associates in Grand Rapids, Michigan is making a living from green practices.  “The firm, which specializes in restoring old buildings, uses techniques and tools including green roofs that are covered with plants, storm water management systems, and environmentally friendly building systems” (“Making a Profit and a Difference,” New York Times, October 5, 2006, p. C5).  Guy Bazzini says, “We found that we can build green buildings that utilize 40 percent to 50 percent less energy at the same price as traditional buildings.”  Local First of Grand Rapids “is just one of 35 similar business networks around the United States and Canada that have sprung out of the Business Alliance for Local Living Economies, or Balle, a nonprofit organization founded in 2001 by two successful small-business owners in Boston and Philadelphia.”  The concept is to foster profitability but combine it with social and environmental consciousness. 

313. Getting Naked
Don Tapscott, co-author of The Naked Corporation and a Canadian B-School professor, believes he’s on to the next big thing for corporations.  See the Economist, October 18, 2006, p, 66.  In this age, when business is becoming ever more virtual, he believes the ticket for companies now is to become increasingly more transparent to customers, employees, investors, and other constituencies.  Of course, he does not reckon with Sarbanes-Oxley, the hamfisted attempt of Congress to get companies to let it all hang out but which instead has had the dual effect of making public companies more closemouthed and causing private companies to stay private.  Greater transparency he feels is inevitable, since everybody now demands more.  The Economist feels the big problem is that in an imperfect world that there is simply a great deal that competitive businesses have to keep private.  We ourselves feel the real challenge is how to orchestrate not transparency, but interconnection.  To win the global race now, a company needs its employees to be networking with a host of people outside the corporate walls who have no economic connection to the company but who have knowledge to share and who can help build practical theses of how to accomplish this or that business chore.  From our own experience, we can say that the real problem is to develop a mindset where one’s employee does not think in us vs. them terms.  (11/22/06)

312. Small Is Beautiful
We’re always debating whether the sentiment “small is beautiful” is actually true, especially when we contemplate the havoc of many small enterprises.  But it is true in at least one regard.  “Highest Safety Risks Found at Small Worksites of Larger Businesses, Not at Small Businesses,” according to the Rand Review, Summer 2006, p. 3. “Employees at worksites of fewer than 100 employees were much safer when a small business owned the plant than when a larger business did.”  Better to be owned by a business of 1 to 20 workers, or a business over a 1,000 workers, if you are at a small worksite: companies with 20 to 999 workers experience 2.5 to 7 times the safety problems.  This would suggest that the Feds should lighten up on safety enforcement at very small businesses and at worksites that have more than 20 workers.  In any event, we suspect that safety correlates with the quality of onsite worker supervision which, in the case of very small businesses, probably means that the owner is present.  (11/15/06)

311. Jonathan Schwartz
It makes me want to buy the stock.  Most CEOs are afraid of the Internet, and their websites show it.  We cannot say enough bad things about corporate websites: they’re uninformative, out-of-date, badly written, poorly and usually over-designed, and on and on.  But Jonathan Schwartz, the guy who’s in charge of the store at Sun MicroSystems now that the founder is up and out, keeps an interesting blog, Jonathan’s Blog, where he tries to lend transparency to both Sun and himself.  He has beaten back his lawyers who are the enemies of communication in most companies:

As a CEO who blogs, the most frequent question I get is, “doesn't this drive your lawyers nuts?”  And as I’ve said, no.  Our legal team understands, guides, drives—and protects—our business.  All without sneaking into phone booths to change costume.  And with technology, regulation and our products all colliding in the marketplace (is it legal to scream “SOX!” in a theater filled with CEO’s?), I sleep better at night knowing they’re actively engaged.

Very quietly, this week, our General Counsel—the senior most lawyer in all of Sun—started a blog.  It’s here.  He, too, is now the only member of his tribe, the only GC in all the Fortune 500 to have a blog.

A great company that has stumbled, Sun has been in retreat.  There is no better way to lead a charge back into the marketplace than to be the CEO who says it all.

The New York Times, July 30, 2006, p. BU3 wrote about his exceptional bog, noting that he’s the only Fortune CEO to put his pen to computer.  The only way you can get a wisp of what’s happening with the notoriously, paranoid secretive Steve Jobs is to read a parody site, “The Secret Life of Steve Jobs.”  Microsoft proudly notes that some 3,000 employees are so are blogging up a storm, but Gates and Steve Ballmer are not among them.

310. Mis-Guided Guidance
We have been at pains to tell companies all the self-defeating things they do to achieve recognition from investors.  In “If You Believe in Yesterday, Your Stock Will Not Act Like Tomorrow,” we lay out some of the myths that companies believe in and act upon in their dealings with the stock market.  But we did not deal with the worst thing companies can do to themselves: giving quarterly or yearly financial guidance to investors is nothing short of suicide.  Sooner or later, you won’t make your numbers and Wall Street will savage your stock.  Sooner or later, the shareholder suit mills such as Lerach, Coughlin will go after a chunk of your assets, claiming you deceived investors and traded on your own behalf.  In an attempt to meet the highflying targets you have set out, you will sell products at low prices and fail to invest for the long term.  The reasons for not giving financial guidance are so numerous and so obvious that it’s hard to imagine why companies fall in this trap.  But, of course, analysts, like reporters, are lazy and want their work done for them.  Better for them if you make a fool of yourself by putting out predictions and then they can put out long scripts on why you may and why you may not make it.

At long last some sober citizens at the Business Roundtable and the CFA Institute have come out with an impressive document that examines forecasting.  Simple to say, “Breaking the Short-Term Cycle” instructs companies, “Give It Up.”  Focus on the long term and communicate about the long term.  We have spent considerable energy with our clients here and abroad for several decades teaching them how to do just that.  Basically we have shown companies how to devise and communicate very long term goals: everyone is clear that they are goals and that performance may deviate sharply from the goals from year to year.

Update: Why Bother?
“For the life of me I don’t know why companies give earnings guidance.  Nobody can see the future; yet every quarter it’s the same old song and dance” (Herb Greenberg, “If Earnings Guidance Lacks Clear Direction, Why Bother?” Wall Street Journal, February 3-4, 2007, p. B3).  The number of companies providing any guidance has dropped to 66% from 71% a year ago, and those providing only annual guidance has increased from 23% to 43%.  Baruch Lev of NYU, author of the paper “To Guide or Not to Guide,” still believes guidance is important in order to control the range of analyst forecasts.  (4/11/07)

Update: Profitless Prophets
McKinsey confirms what so many of is already know.  Earnings forecasting is a profitless, dangerous game.  In “The Earnings Guidance Fallacy,” McKinsey asserts “Contrary to what some executives believe, frequent earnings guidance doesn’t raise market valuations; indeed, it appears to have no significant relationship with them—regardless of the year, the industry, or the size of the company in question.” “Read ‘The misguided practice of earnings guidance’ (March 2006) for more on why companies should disclose their long-range strategic goals and business fundamentals instead of speculating about their short-term performance.”  (3/12/08)

309. Bain’s Orit Gadiesh
Hailing from Israel, “Ms. Gadiesh lives mostly in Paris with her British husband.”  Although hardly speaking English when she began at Harvard Business School, she graduated in top 5% of class.  When Bain was near bankruptcy, Gadiesh, trained as psychologist, arranged a rapprochement between founders and 1980 employees to ease up on the firm.  She became chairman in July 1993.  She says you should go for 80% of perfection, since you cannot realize 100%, which probably explains her mediating abilities as well.  See the Economist, October 22, 2005, p. 72.  (10/4/06)

308. Innovative Toys—Japan
Many commentators from around the world, and even the Japanese, take potshots at Japanese creativity and innovation.  But as we take a look at the global toy industry, we find it is Japan and not the United States that has been moving in new directions, as sales of traditional toys stagnate.  In “Flexing Your Brain,” we found that Nintendo, hitting the wall a bit in sales to kids, now has moved onto adults, offering games both in Japan and now in the West that playfully exercise the brains of adults with the hope of improving mental skills.  But its toy industry is generally vibrant because it has realized it can expand the $6 billion domestic market for toys, “by marketing to adults as well as children.”  See the Economist, May 6, 2006, p.66. 

Update: J-Pop Culture
“J-Pop Goes the Market” (Duke Magazine, September October 2006, pp.28-35) theorizes why Japan has been able to make such a push in world toy and other entertainment markets, relating this success to a number of cultural strands that have come together to make Japan uncover the soft spot in global consumer markets. “Sanrio Company Ltd. ... sells nearly $1 billion worth of Hello Kitty and other cute-character fancy goods each year,” 15 percent of its profits coming from outside Japan.  There was a huge turnout for J-Pop products at the 15th Anime Expo in Anaheim in July 2006.  Anne Allison in Millennial Monsters: Japanese Toys and the Global Imagination tracks the evolution of the monster, cute character toys, and related media market in Japan from the end of World War II.  Kawaii, or the cute characters, have thoroughly penetrated Japanese culture, every company having a cartoon mascot that is one way any group (company or otherwise) projects its identity in Japan.  Takashi Murakami, an artist of wide renown, is both a practitioner in the J-Pop culture and a critic of it.  The key to the re-invention of Japanese toy and media companies has been their ability to connect with the J-Pop culture which permeates Japan but which also is fantastic enough in design to have a global appeal.  For yet more on J-Pop, kindly visit American Radioworks, which transports you right into the culture that is increasingly shaping everyday life in developed countries.  (12/20/06)

Update: Nintendo Exploding
Nintendo’s invention of DS (along with other innovations) has powered a surge in revenues and profits.  “Strong holiday sales of its Wii videogame console and Nintendo portable game device helped Nintendo Co. nearly double its nine-month net profit and raise its sales forecast for the third time this year.”  “In recent years, Nintendo has tried to expand its videogame market by targeting women and the elderly with easy-to-play casual games” (Wall Street Journal, January 25, 2008, p. B3).  (5/14/08)

307. Samurai Peddler
Arthur Schiff just passed away on August 24 in Coral Gables, Florida.  Schiff is credited with writing the phrase: “But wait! There’s more!”  Today, the phrase and the knives are an indelible part of American kitsch culture, and a tribute to the success of his Ginsu ads on TV.  “One of his most successful ideas, which he said came to him during a bout of insomnia, was finding a way to sell a knife with the uninspiring Quikut brand name.  Mr. Schiff dreamed up a new name—Ginsu—that invoked a Japanese heritage.”  “Between 1978 and 1984, the Ginsu racked up sales of more than $50 million….”  “And Mr. Schiff sold everything from singing bird clocks to antisnore spray to pocket-sized sewing machines in more than 1,800 low-budget, late-night television commercials that pioneered the direct-response form of advertising urging viewer to ‘buy now’ by calling a toll-free 800 phone number” (Wall Street Journal, September 9-10, 2006, p. A4).  Moving on from Dial Media, he opened his own Direct Response Associates in Sunrise, Florida in 1993. 

306. A Tea Party Is Brewing
Tea packagers on several continents are trying a host of tactics to broaden the market and capture more share.  Generally, however, their efforts are strategically flawed, since, in today’s world, one must have a retail presence to extend and remodel brands.  There’s no Starbucks here, and the sundry purveyors that peddle coffees tend to do a crummy job in the tea business.  But there is some retail movement in the U.S. 

“Tea drinking is on a roll in the U.S.  There are some 2,000 tea houses nation-wide, up from 200 a decade ago.  And tea sales reached $6.2 billion last year, more than quadruple their level in the early 1990’s according to the Tea Association of the USA” (Wall Street Journal, 2006).  Moreover, there is tremendous ferment in the specialty tea market which you can read about in “The Very Best: Wine, Tea, Coffee, etc.” on The Global Province. 

United States.  “Tealife LP opened Tempest as something of a Starbucks knockoff….  TedGschwender USA Inc, originally a German company with more than 130 stores globally, opened its first U.S. store in Chicago in March 2005.”  The Germans, incidentally, are the most avid buyers in the world of the finest green tea and other high-end blends.  “Foodx Globe Co, which operates several tea shops in Japan, opened its first green-tea bar in May in Seattle…”  “Teavana Holdings Inc. of Atlanta has the biggest foothold in the market with nearly 50 stores.”  “In 1987, beverage company Snapple introduced an ice-tea line”  The Journal notes that some retailers are consciously appealing to an upper crust niche, while the others are going mass market. 

Great Britain.  The tea market has gotten a bit tatty in Great Britain, and choosy U.S. customers are looking beyond British brands to get better taste.  But the Brits are trying for a comeback.  “Twinings, Britain’s oldest tea brand, wants to turn the teakettle into the new wine rack” (Wall Street Journal, July 10, 2006, p. B5).  “Twinings is introducing specialty brands, including a new line of white teas due our in September….”  “Globally, the market for all fruit and herbal teas grew 6.3% in revenue terms last year, and that for specialty black teas rose 3.1%, compared with just 2.5% for standard blends….” 

305. South Coast Mall
Henry Segerstrom’s South Coast Plaza, near John Wayne Airport in Orange County, likes to think of itself as the Tiffany of malls.  “A South Coast Plaza shopper goes from Burberry to Bulgari, pops into Louis Vuitton and stops for lunch at Pinot Province.”  Somehow we remember a distinctly more middle market luncheon experience there.  “But Henry concedes that the Plaza for some time has been generating annual sales of $1 billion—and is on track to reach $1.5 billion next year” (The Economist, July 1, 2006, p. 62. 

304. Confederate Motor Company
It’s nice to read about a company that puts it all on the inside—not the outside.  Just the opposite of your cellphone.  “With its primitive, shockingly different look, the B91 Wraith recalls board racers from the early 1900’s” (“Out of New Orleans, Confederate Rises,” New York Times, July 2, 2006, p.S11).  “Now Confederate has moved with the old Confederacy, from New Orleans to Birmingham, Alabama, not far from the Barber Vintage Motorsports Museum and racetrack.  Being close to the museum, which has a collection of 900 motorcycles that is considered one of the best in the world, is appropriate.”  “Though high-tech in materials and construction methods,” the Wraith is clunky in appearance.  Founded in 1991 by Matt Chambers, the company introduced the Hellcat in 1996.  “The V-twin engine is built specifically for Confederate by Katech Inc. of Clinton Township, Michigan.”  “The wheels are 17-inch Italian-built Marchesinis with German Metzler tires.  There are serious brakes: an eight-piston Spiegler setup on the front and a Brembo on the back.”  The company’s credo is: 

Never compromise passion, intensity, time or money.
Create through deep considered actual individual emotion.
Perfect a balance of technology and the primitive.
Invest absolute faith.
Overbuild.
Maximize and evolve individual craftsmanship.
Relish the challenge.
Persist eternally (8/2/06)

302. Managing by Mistake
Paul Schoemaker and Robert Gunther explores the uses of intentional errors in “The Wisdom of Deliberate Mistakes” in the Harvard Business Review, June 2006.  Before its break up, the Bell System could require deposits from many customers.  But nobody knew whether it was asking the right people.  So, in a large sample of 100,000 customers, it asked for no deposit but found that an impressive number paid their bills in a timely manner.  It refined its model and screened new customers more intelligently.  As a result, it saved a great deal of money and effort.  It’s a commonplace that we learn from our mistakes, but companies usually have failed to tap into this insight.  The right mistakes and right course corrections can speed organizational learning and secure competitive advantage.  Implicit in all this is that so many longtime institutional practices have long outlived their usefulness and add to costly corporate overhead.  (7/19/06)

301. -new- Mayer's Marker
Martin Mayer, who has written about the Fed, lawyers, and a host of other important sectors in our society, is a painstaking author whose insights soar beyond the average journalist.  Apparently he now hangs out at the Brookings, but we won’t hold that against him.  His “The Mark of the Bust” (New York Times, June 14, 2006, p. A23) is worth a read, and you can take it all in the 5 sips of your morning coffee.  “What we have to watch out for is a sudden and drastic increase in foreign official holdings.  Rapid growth in this number in the late 1960’s and 1970’s forecast the recessions of the early 1970’s and 1980’s, and it could happen again.  …  Recent large increases in foreign official holdings indicate that foreign private investors see fewer attractive places to put their money in  the American economy.”  He takes this to be the most important number appearing in the panoply of statistics every Thursday night “as an appendix to the weekly statement of the condition of the Federal Reserve System.”  It is the quantity of government and agency securities held for “foreign official and international accounts.”  (7/19/06)

300. Secrecy at Apple
Obviously Steve Jobs has done a brilliant job saving Apple by making it into a music company.  So our youngsters exit this world by tapping away instant messages on their personal computers while plugging their ears into their iPods to drown the senses in a vast catalog of music.  It’s odd that this company that is built on a personal computing and listening relationship with young consumers is a bit kinky, unfriendly, and furtive.  See “At Apple, Secrecy Complicates Life But Maintains Buzz,” New York Times, June 28, 2006, pp. A1 and A11.  We don’t know how much its lack of transparency has to do with its success.  We always have been annoyed that it led the way in doing away with printed instructions for its computers—you know, those badly written technical guides that ensure that you cannot operate the darn things.  Jobs, incidentally, no longer has a print annual report for shareholders.  Ironically, it was a glossy annual report that announced that IBM was the mainframe company that was going to remake the world in the 1950s, a company apart from all others.  HP terminated a deal it had with Apple on iPods, since Apple often did not communicate vital information to HP in a timely manner.  “Most Apple employees are allowed to enter only their section of the company’s headquarters complex in Cupertino, California, helping the company keep a tight lid on its secrets.”  “It has fired and later sued workers who leaked information about unannounced products.  More recently, it has filed suits against Apple-enthusiast Web sites (e.g., PowerPage and AppleInsider) that publish tidbits about the company.  The secrecy apparently helps its marketing, generating heaps of curiosity in the marketplace about new products.  One university manager says, “Apple went from being the most open company in the mid-90s to being an impossibly closed company.”  (7/12/06)

299. Chez McDonald
Old McDonald had a farm, but he also has a fast food stop in Paris and all around France.  There are a host of companies in this world that do a better job overseas than they do on their home turf.  Colgate has been a much better competitor of Proctor and Gamble around the world than it has been in the United States; in some of its lean years, the revenues from overseas kept it going.  The biggest victory of Georgia-based American Family Life Assurance (AFLAC) has been in Japan, not the United States.  For the past few years, McDonald’s—the hamburger chain we still like to ignore—has done a better job in France, of all places, than in the United States.  It’s been a fascinating story, and it is partially retold in “A McDonald’s Ally in Paris,” New York Times, June 20, 2006, pp. C1 and C5. 

298. Air Canada’s Sidelines
“Air Canada last year became the first airline to float part of its frequent-flier program on a stock exchange.  The listing valued Aeroplan LP at more than $2 billion” (Wall Street Journal, April 25, 1006, pp. A1 and A14).  Flying big airplanes is supposed to be the business, but Chairman Robert Milton is finding the profits in support operations such as maintenance and regional flights.  ACE Aviation Holdings, Inc., an umbrella group he created, “was one of the few profitable airline companies in North America last year, its first full year of operations,” netting $226.5 million on $8.6 billion revenues.  The airline’s new president Montie Brewer, meanwhile, has tried a host of innovations to garner more revenues—simpler budget fares, subscription fare books, etc.  (7/5/06)

297. Skip the MBA
Matthew’s Stewart’s “The Management Myth,” Atlantic, June 2006, is worth a read, as long as you bring along a skeptical eye.  He basically says that management consultants and business schools are not worth a damn.  All, in his eyes, either is telling you to put scientific management to work (i.e., Frederick Winslow Taylor), which means getting more work out of the same employees, or is pushing some version of  Professor Elton Mayo, which consists of using some happy-family techniques on your employees—hoping without much evidence that either the stick or the carrot will reap big dividends. 

Even if vastly oversimplified and if far too long (both symptomatic characteristics of the Atlantic which understands absolutely nothing about business), Stewart and his article hint at something we should face up to: the rise of gurus, business schools, and consultancies have done little for businesses or national economies.  In fact, they have risen just as business and the economy were descending, both in America and the West.  By and large, post-war management consulting firms have grown fat showing businesses how to take out costs, which was tactically right, but which amounted to long-term suicide.  You either figure out how to grow—for a century—or you die. 

You may correctly ask us why then we bring Stewart to your attention, since he is eminently forgettable.  It’s to ask ourselves what kind of thinking promotes healthy economic growth, if the gurus and the business schools ultimately are subtractive.  We don’t know the answer, but we suspect the real sources of growth will be a surprise to us all. 

296. The National Football League
Franchises in the National Football League are more highly valued than those in other sports—for a simple reason.  Under the direction of Commissioner Paul Tagliabue, the teams have engaged in monopoly, restraint of trade, and generally oligarchic practices that have been a win-win for every team in the sport.  See The Economist, April 29, 2006, pp. 63-64.  There have been no strikes, which have plagued other major sports.  “It has the highest total revenues of the four, at nearly $6 billion a year.  It has the firmest grip on its labour costs, which have grown only 9% a year since 1990, compared with 12-16% in the other three leagues.”  The owners share about 70% of their revenues with each other.  “And they stick to a strict salary cap that limits the amount each team can spend on players’ salaries.”  Every team is financially viable and can put a good team out on the pasture.  The league itself negotiates all TV contracts, obtaining maximum leverage with the TV networks, the most important revenue source.  (6/28/06)

295.